Thu 01/06/2022 17:51 PM
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Transaction Documents

The Chicago Board of Education, or CBOE, released this afternoon through MuniOS a preliminary offering statement and road show presentation related to its planned $862.65 million issuance of unlimited tax general obligation, or ULTGO, bonds that show the transaction is expected to price on Jan. 13 and close by Feb. 1. The deal is proceeding as Chicago Mayor Lori Lightfoot’s administration and the Chicago Teachers Union, or CTU, continue an ongoing dispute over Covid-19 safety concerns that led to the cancellation of classes Wednesday, Jan. 5, and today.

The CBOE will issue $500 million of Series 2022A ULTGO dedicated revenue bonds to finance capital works and $359.4 million of Series 2022B ULTGO refunding dedicated revenue bonds to refinance outstanding Series 2011A bonds, according to the road show presentation. The Series 2022A bonds will mature from 2042 through 2047, and the Series 2022B bonds will mature from 2035 through 2041.

The bonds are secured by the full faith and credit of the CBOE and pledged state aid revenue with a 1.1x required coverage ratio. There is an additional tax revenue pledge if the state aid revenue is insufficient, according to the documents.

Columbia Capital Management is advising the CBOE on the transaction. Goldman Sachs serves as senior underwriter and Siebert William Shank as joint senior underwriter on the transaction with 11 other investment banks participating.

Ahead of the transaction, Fitch upgraded its rating on CBOE’s ULTGO bonds to BB+ from BB with a stable outlook. The bonds also carry a BBB rating with stable outlook from Kroll, according to the transaction documents released today. CBOE had announced on Dec. 8, 2021, that it was exploring a refinancing transaction.

The road show presentation touts improved finances of the Chicago Public Schools system despite the Covid-19 pandemic. The improved performance is credited to additional support from the state and federal government coupled with CPS’ “prudent financial practices.”

CPS closed fiscal year 2021 with an $804 million general operating balance, a $237 million improvement from the previous year, the presentation indicates. The road show also highlights that CPS’ two largest revenue streams - property tax and state aid - are expected to grow during the current fiscal 2022. The CPS fiscal 2022 budget grew by $905 million, bolstered by additional federal relief funding, and the system is expected to close this year with a surplus, the presentation adds.

CPS will pay $204 million toward the unfunded liability of its teachers pension system, but the presentation says that CPS pension funding has stabilized with the state covering other teacher pension costs and providing a related healthcare contribution. CPS has reduced short-term borrowing by about $600 million over the past four years, the presentation adds.

The transaction is proceeding as the Lightfoot administration and the CTU battle over a return to the classroom this week amid a surge in cases of the new omicron variant of Covid-19. The CTU voted on Tuesday, Jan. 4, to conduct remote learning because of the spike in Covid-19 cases and concerns about the safety protocols in place at public schools. Classes were canceled on Wednesday and Thursday, and the union said that teachers will not return to the classroom until the “current surge in cases substantially subsides, or the mayor's team at CPS signs an agreement establishing conditions for return that are voted on and approved by the CTU.”

In an interview with MSNBC today, Lightfoot blasted the CTU for politicizing the issue and said that “science and the data … tells us unequivocally that our schools in-person are the best place for our students to be.” The mayor said more than $100 million has been invested in Covid-19 mitigation measures at city public schools and called on the union to return to the bargaining table “in good faith.”
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